Future Group buys retail store chain Sangam Direct
This will be Future Group’s third acquisition in northern India in the food and groceries space in the last three years after Big Apple and EasyDay
Mumbai: Future Group has bought Sangam Direct, a chain of retail stores earlier known as Sabka Bazaar, from Wadhawan Retail Ventures Pvt. Ltd, chief executive Kishore Biyani said on Wednesday. He did not disclose the size of the deal.
This will be Future Group’s third acquisition in northern India in the food and groceries space in the last three years after Big Apple and EasyDay.
In the south, the company acquired Nilgiris in 2015 and is in talks to buy the retail business of Heritage Foods Ltd, Biyani said on the sidelines of the India Retail Forum 2016 in Mumbai.
Sangam Direct and Heritage Foods will add Rs800 crore to Future Group’s annual revenue, he added.
Heritage Foods, which operates 114 stores in Hyderabad and Bengaluru, reported revenue of Rs582.9 crore for 2015-16, up 18% from the previous fiscal.
Sangam Direct, which has 30-35 stores across Delhi and Bengaluru, was started by Hindustan Unilever Ltd in 2001 as its online groceries delivery platform. It was acquired in 2007 by the Wadhawan group, which owned the Spinach retail chain.
At present, Future Group, through Future Retail Ltd and Future Consumer Enterprise Ltd, operates about 800 stores with about 14 million sq. ft of space across brands. Of these, around 500 are small format EasyDay and Nilgiris convenience stores and the rest are the larger format stores of Big Bazaar and FBB, which is the group’s fashion retail offering. Future Consumer Enterprise also runs 5,000 Annapurna Bhandars in partnership with the government of Rajasthan.
“My sense is that Biyani would have paid for the book value of the business. He does not need to pay top dollar for incremental businesses, as this will not add much to his top line,” said Pankaj Jaju, head of strategic partnerships, Axis Bank Ltd.
Future Group is the parent of listed retail companies such as Future Retail Ltd, Future Lifestyle Fashions Ltd and Future Consumer Enterprise Ltd.
“Smaller players have not been able to build scale and this is a scale business,” said Abhishek Malhotra, partner at consulting firm A.T. Kearney. He said these acquisitions will help the company drive scale and efficiencies.
According to Malhotra, eventually there will be 3-4 large retail companies and a couple of regional players in every geography. The regional ones will consolidate, he adds.